§ 105-275. Property classified and excluded from the tax base. - North Carolina Statutes

§ 105‑275.  Propertyclassified and excluded from the tax base.

The following classes ofproperty are designated special classes under Article V, Sec. 2(2), of theNorth Carolina Constitution and are excluded from tax:

(1)        Repealed by SessionLaws 1987, c. 813, s. 5.

(2)        Tangible personalproperty that has been imported from a foreign country through a North Carolinaseaport terminal and which is stored at such a terminal while awaiting furthershipment for the first 12 months of such storage. (The purpose of thisclassification is to encourage the development of the ports of this State.)

(3)        Real and personalproperty owned by nonprofit water or nonprofit sewer associations orcorporations.

(4)        Repealed by SessionLaws 1987, c. 813, s. 5.

(5)        Vehicles that theUnited States government gives to veterans on account of disabilities theysuffered in World War II, the Korean Conflict, or the Vietnam Era so long asthey are owned by:

a.         A person to whom avehicle has been given by the United States government or

b.         Another person whois entitled to receive such a gift under Title 38, section 252, United StatesCode Annotated.

(5a)      A motor vehicle ownedby a disabled veteran that is altered with special equipment to accommodate aservice‑connected disability. As used in this section, disabled veteranmeans a person as defined in 38 U.S.C. § 101(2) who is entitled to specialautomotive equipment for a service‑connected disability, as provided in38 U.S.C. § 3901.

(6)        Special nuclearmaterials held for or in the process of manufacture, processing, or delivery bythe manufacturer or processor thereof, regardless whether the manufacturer orprocessor owns the special nuclear materials. The terms "manufacture"and "processing" do not include the use of special nuclear materialsas fuel. The term "special nuclear materials" includes (i) uranium233, uranium enriched in the isotope 233 or in the isotope 235; and (ii) anymaterial artificially enriched by any of the foregoing, but not includingsource material. "Source material" means any material except specialnuclear material which contains by weight one twentieth of one percent (0.05%)or more of (i) uranium, (ii) thorium, or (iii) any combination thereof.Provided however, that to qualify for this exemption no such nuclear materialsshall be discharged into any river, creek or stream in North Carolina. Theclassification and exclusion provided for herein shall be denied to anymanufacturer, fabricator or processor who permits burial of such material inNorth Carolina or who permits the discharge of such nuclear materials into theair or into any river, creek or stream in North Carolina if such dischargewould contravene in any way the applicable health and safety standardsestablished and enforced by the Department of Environment and Natural Resourcesor the Nuclear Regulatory Commission. The most stringent of these standardsshall govern.

(7)        Real and personalproperty that is:

a.         Owned either by anonprofit corporation formed under the provisions of Chapter 55A of the GeneralStatutes or by a bona fide charitable organization, and either operated by suchowning organization or leased to another such nonprofit corporation orcharitable organization, and

b.         Appropriatedexclusively for public parks and drives.

(8)       a.         Realand personal property that is used or, if under construction, is to be usedexclusively for air cleaning or waste disposal or to abate, reduce, or preventthe pollution of air or water (including, but not limited to, waste lagoons andfacilities owned by public or private utilities built and installed primarilyfor the purpose of providing sewer service to areas that are predominantlyresidential in character or areas that lie outside territory already havingsewer service), if the Department of Environment and Natural Resources or alocal air pollution control program for air‑cleaning devices located inan area where the Environmental Management Commission has certified a local airpollution control program pursuant to G.S. 143‑215.112 furnishes acertificate to the tax supervisor of the county in which the property issituated or to be situated stating that the Environmental Management Commissionor local air pollution control program has found that the described property:

1.         Has been or will beconstructed or installed;

2.         Complies with orthat plans therefor which have been submitted to the Environmental ManagementCommission or local air pollution control program indicate that it will complywith the requirements of the Environmental Management Commission or local airpollution control program;

3.         Is being effectivelyoperated or will, when completed, be required to operate in accordance with theterms and conditions of the permit, certificate of approval, or other documentof approval issued by the Environmental Management Commission or local airpollution control program; and

4.         Has or, whencompleted, will have as its primary rather than incidental purpose thereduction of water pollution resulting from the discharge of sewage and wasteor the reduction of air pollution resulting from the emission of aircontaminants.

a1.       Sub‑subdivisiona. of this subdivision shall not apply to an animal waste management system, asdefined in G.S. 143‑215.10B, unless the Environmental ManagementCommission determines that the animal waste management system will accomplishall of the following:

1.         Eliminate thedischarge of animal waste to surface waters and groundwater through directdischarge, seepage, or runoff.

2.         Substantiallyeliminate atmospheric emissions of ammonia.

3.         Substantiallyeliminate the emission of odor that is detectable beyond the boundaries of theparcel or tract of land on which the farm is located.

4.         Substantiallyeliminate the release of disease‑transmitting vectors and airbornepathogens.

5.         Substantiallyeliminate nutrient and heavy metal contamination of soil and groundwater.

b.         Real or personalproperty that is used or, if under construction, is to be used exclusively forrecycling or resource recovering of or from solid waste, if the Department of Environmentand Natural Resources furnishes a certificate to the tax supervisor of thecounty in which the property is situated stating the Department of Environmentand Natural Resources has found that the described property has been or will beconstructed or installed, complies or will comply with the rules of theDepartment of Environment and Natural Resources, and has, or will have as itsprimary purpose recycling or resource recovering of or from solid waste.

c.         Tangible personalproperty that is used exclusively, or if being installed, is to be usedexclusively, for the prevention or reduction of cotton dust inside a textileplant for the protection of the health of the employees of the plant, inaccordance with occupational safety and health standards adopted by the Stateof North Carolina pursuant to Article 16 of G.S. Chapter 95. Notwithstandingthe exclusive use requirement of this sub‑subdivision, all parts of aventilation or air conditioning system that are integrated into a system usedfor the prevention or reduction of cotton dust, except for chillers and coolingtowers, are excluded from taxation under this sub‑subdivision. TheDepartment of Revenue shall adopt guidelines to assist the tax supervisors inadministering this exclusion.

d.         Real or personalproperty that is used or, if under construction, is to be used by a majorrecycling facility as defined in G.S. 105‑129.25 predominantly forrecycling or resource recovering of or from solid waste, if the Department ofEnvironment and Natural Resources furnishes a certificate to the tax supervisorof the county in which the property is situated stating the Department ofEnvironment and Natural Resources has found that the described property hasbeen or will be constructed or installed for use by a major recycling facility,complies or will comply with the rules of the Department of Environment andNatural Resources, and has, or will have as a purpose recycling or resourcerecovering of or from solid waste.

(9) through (11) Repealed bySession Laws 1987, c. 813, s. 5.

(12)      Real property ownedby a nonprofit corporation or association exclusively held and used by itsowner for educational and scientific purposes as a protected natural area. (Forpurposes of this subdivision, the term "protected natural area" meansa nature reserve or park in which all types of wild nature, flora and fauna,and biotic communities are preserved for observation and study.)

(13)      Repealed by SessionLaws 1973, c. 904.

(14)      Motor vehicleschassis belonging to nonresidents, which chassis temporarily enters the Statefor the purpose of having a body mounted thereon.

(15)      Upon the date onwhich each county's next general reappraisal of real property under theprovisions of G.S. 105‑286(a) becomes effective, standing timber, pulpwood,seedlings, saplings, and other forest growth. (The purpose of thisclassification is to encourage proper forest management practices and todevelop and maintain the forest resources of the State.)

(16)      Non‑businessProperty. – As used in this subdivision, the term "non‑businessproperty" means personal property that is used by the owner of theproperty for a purpose other than the production of income and is not used inconnection with a business. The term includes household furnishings, clothing,pets, lawn tools, and lawn equipment. The term does not include motor vehicles,mobile homes, aircraft, watercraft, or engines for watercraft.

(17)      Real and personalproperty belonging to the American Legion, Veterans of Foreign Wars, DisabledAmerican Veterans, or to any similar veterans organizations chartered by theCongress of the United States or organized and operated on a statewide ornationwide basis, and any post or local organization thereof, when usedexclusively for meeting or lodge purposes by said organization, together withsuch additional adjacent real property as may be necessary for the convenientand normal use of the buildings thereon. Notwithstanding the exclusive‑userequirement hereinabove established, if a part of a property that otherwisemeets this subdivision's requirements is used for a purpose that would requirethat it not be listed, appraised, assessed or taxed if the entire property wereso used, that part, according to its value, shall not be listed, appraised,assessed or taxed. The fact that a building or facility is incidentallyavailable to and patronized by the general public, so far as there is nomaterial amount of business or patronage with the general public, shall notdefeat the classification granted by this section.

(18)      Real and personalproperty belonging to the Grand Lodge of Ancient, Free and Accepted Masons ofNorth Carolina, the Prince Hall Masonic Grand Lodge of North Carolina, theirsubordinate lodges and appendant bodies including the Ancient and Arabic OrderNobles of the Mystic Shrine, and the Ancient Egyptian Order Nobles of theMystic Shrine, when used exclusively for meeting or lodge purposes by saidorganization, together with such additional adjacent real property as may benecessary for the convenient normal use of the buildings thereon.Notwithstanding the exclusive‑use requirement hereinabove established, ifa part of a property that otherwise meets this subdivision's requirements isused for a purpose that would require that it not be listed, appraised,assessed or taxed if the entire property were so used, that part, according toits value, shall not be listed, appraised, assessed or taxed. The fact that abuilding or facility is incidentally available to and patronized by the generalpublic, so far as there is no material amount of business or patronage with thegeneral public, shall not defeat the classification granted by this section.

(19)      Real and personalproperty belonging to the Loyal Order of Moose, the Benevolent and ProtectiveOrder of Elks, the Knights of Pythias, the Odd Fellows, the Woodmen of theWorld, and similar fraternal or civic orders and organizations operated fornonprofit benevolent, patriotic, historical, charitable, or civic purposes,when used exclusively for meeting or lodge purposes by the organization,together with as much additional adjacent real property as may be necessary forthe convenient normal use of the buildings. Notwithstanding the exclusive‑userequirement of this subdivision, if a part of a property that otherwise meetsthis subdivision's requirements is used for a purpose that would require thatit not be listed, appraised, assessed, or taxed if the entire property were soused, that part, according to its value, shall not be listed, appraised,assessed, or taxed. The fact that a building or facility is incidentallyavailable to and patronized by the general public, so far as there is nomaterial amount of business or patronage with the general public, shall notdefeat the classification granted by this section. Nothing in this subdivisionshall be construed so as to include social fraternities, sororities, andsimilar college, university, or high school organizations in the classificationfor exclusion from ad valorem taxes.

(20)      Real and personalproperty belonging to Goodwill Industries and other charitable organizationsorganized for the training and rehabilitation of disabled persons when usedexclusively for training and rehabilitation, including commercial activitiesdirectly related to such training and rehabilitation.

(21)      (Repealedeffective for taxes imposed for taxable years beginning on or after July 1,2009) The first thirty‑eight thousand dollars ($38,000) in assessedvalue of housing together with the necessary land therefor, owned and used as aresidence by a disabled veteran who receives benefits under 38 U.S.C. § 2101.This exclusion shall be the total amount of the exclusion applicable to suchproperty.

(22)      Repealed by SessionLaws 1987, c. 813, s. 5.

(23)      Tangible personalproperty imported from outside the United States and held in a Foreign TradeZone for the purpose of sale, manufacture, processing, assembly, grading,cleaning, mixing or display and tangible personal property produced in theUnited States and held in a Foreign Trade Zone for exportation, either in itsoriginal form or as altered by any of the above processes.

(24)      Cargo containers andcontainer chassis used for the transportation of cargo by vessels in oceancommerce.

            Theterm "container" applies to those nondisposable receptacles of apermanent character and strong enough for repeated use and specially designedto facilitate the carriage of goods, by one or more modes of transport, one ofwhich shall be by ocean vessels, without intermediate reloadings and fittedwith devices permitting its ready handling particularly in the transfer fromone transport mode to another.

(24a)    Aircraft that is ownedor leased by an interstate air courier, is apportioned under G.S. 105‑337to the air courier's hub in this State, and is used in the air courier'soperations in this State. For the purpose of this subdivision, the terms"interstate air courier" and "hub" have the meaningsprovided in G.S. 105‑164.3.

(25)      Tangible personalproperty shipped into this State for the purpose of repair, alteration,maintenance or servicing and reshipment to the owner outside this State.

(26)      For the tax yearimmediately following transfer of title, tangible personal propertymanufactured in this State for the account of a nonresident customer and heldby the manufacturer for shipment. For the purpose of this subdivision, the term"nonresident" means a taxpayer having no place of business in NorthCarolina.

(27),     (28) Repealed bySession Laws 1983, c. 643, s. 1.

(29)      Real property andeasements wholly and exclusively held and used for nonprofit historicpreservation purposes by a nonprofit historical association or institution,including real property owned by a nonprofit corporation organized for historicpreservation purposes and held by its owner exclusively for sale under anhistoric preservation agreement to be prepared and recorded, at the time ofsale, under the provisions of the Conservation and Historic PreservationAgreements Act, Article 4, Chapter 121 of the General Statutes of NorthCarolina.

(29a)    (Effective fortaxes imposed for taxable years beginning before July 1, 2008) Land withinan historic district, held by a nonprofit corporation organized for historicpreservation purposes, for use as a future site for an historic structure thatis to be moved to the site from another location. Property may be classifiedunder this subdivision for no more than five years. The taxes that wouldotherwise be due on land classified under this subdivision shall be a lien onthe real property of the taxpayer as provided in G.S. 105‑355(a). Thetaxes shall be carried forward in the records of the taxing unit or units asdeferred taxes and shall be payable five years from the fiscal year theexclusion is first claimed unless an historic structure is moved onto the siteduring that time. If an historic structure has not been moved to the sitewithin five years, then deferred taxes for the preceding five fiscal yearsshall immediately be payable, together with interest as provided in G.S. 105‑360for unpaid taxes that shall accrue on the deferred taxes as if they had beenpayable on the dates on which they would originally become due. All liensarising under this subdivision are extinguished upon either the payment of anydeferred taxes under this subdivision or the location of an historic structureon the site within the five‑year period allowed under this subdivision.

(29a)    (Effective fortaxes imposed for taxable years beginning on or after July 1, 2008) Landthat is within an historic district and is held by a nonprofit corporationorganized for historic preservation purposes for use as a future site for anhistoric structure that is to be moved to the site from another location.Property may be classified under this subdivision for no more than five years.The taxes that would otherwise be due on land classified under this subdivisionshall be a lien on the real property of the taxpayer as provided in G.S. 105‑355(a).The taxes shall be carried forward in the records of the taxing unit or unitsas deferred taxes. The deferred taxes are due and payable in accordance withG.S. 105‑277.1F when the property loses its eligibility for deferral as aresult of a disqualifying event. A disqualifying event occurs when an historicstructure is not moved to the property within five years from the first day ofthe fiscal year the property was classified under this subdivision.

(30)      Repealed by SessionLaws 1987, c. 813, s. 5.

(31)      (Effective fortaxes imposed for taxable years beginning before July 1, 2008) Intangiblepersonal property other than leasehold interests in exempted real property.This subdivision does not affect the taxation of software not otherwiseexcluded by subdivision (40) of this section.

(31)      (Effective fortaxes imposed for taxable years beginning on or after July 1, 2008)Intangible personal property other than a leasehold interest that is inexempted real property and is not excluded under subdivision (31e) of thissection. This subdivision does not affect the taxation of software nototherwise excluded by subdivision (40) of this section.

(31a) through (31d) Repealed bySession Laws 1997‑23, s. 3.

(31e)    (Effective fortaxes imposed for taxable years beginning on or after July 1, 2008) Aleasehold interest in real property that is exempt under G.S. 105‑278.1and is used to provide affordable housing for employees of the unit ofgovernment that owns the property.

(32)      Recodified as G.S.105‑278.6A by Session Laws 1998‑212, s. 29A.18(a), effective fortaxes imposed for taxable years beginning on or after July 1, 1998.

(32a)    Inventories owned bycontractors.

(33)      Inventories owned bymanufacturers.

(34)      Inventories owned byretail and wholesale merchants.

(35)      Severable developmentrights, as defined in G.S. 136‑66.11(a), when severed and evidenced by adeed recorded in the office of the register of deeds pursuant to G.S. 136‑66.11(c).

(36)      Repealed by SessionLaws 2001‑474, s. 8, effective November 29, 2001.

(37)      Poultry and livestockand feed used in the production of poultry and livestock.

(38)      Repealed by Session Laws2001‑474, s. 8, effective November 29, 2001.

(39)      Real and personalproperty that is: (i) owned by a nonprofit corporation organized upon therequest of a State or local government unit for the sole purpose of financingprojects for public use, (ii) leased to a unit of State or local governmentwhose property is exempt from taxation under G.S. 105‑278.1, and (iii)used in whole or in part for a public purpose by the unit of State or localgovernment. If only part of the property is used for a public purpose, onlythat part is excluded from the tax. This subdivision does not apply if anydistributions are made to members, officers, or directors of the nonprofitcorporation.

(39a)    A correctionalfacility, including construction in progress, that is located on land owned bythe State and is constructed pursuant to a contract with the State, and anyleasehold interest in the land owned by the State upon which the correctionalfacility is located.

(40)      Computer software andany documentation related to the computer software. As used in thissubdivision, the term "computer software" means any program orroutine used to cause a computer to perform a specific task or set of tasks.The term includes system and application programs and database storage andmanagement programs.

Theexclusion established by this subdivision does not apply to computer softwareand its related documentation if the computer software meets one or more of thefollowing descriptions:

a.         It is embeddedsoftware. "Embedded software" means computer instructions, known asmicrocode, that reside permanently in the internal memory of a computer systemor other equipment and are not intended to be removed without terminating theoperation of the computer system or equipment and removing a computer chip, acircuit, or another mechanical device.

b.         It is purchased orlicensed from a person who is unrelated to the taxpayer and it is capitalizedon the books of the taxpayer in accordance with generally accepted accountingprinciples, including financial accounting standards issued by the FinancialAccounting Standards Board. A person is unrelated to a taxpayer if (i) thetaxpayer and the person are not subject to any common ownership, eitherdirectly or indirectly, and (ii) neither the taxpayer nor the person has anyownership interest, either directly or indirectly, in the other.

Thissubdivision does not affect the value or taxable status of any property that isotherwise subject to taxation under this Subchapter.

Theprovisions of the exclusion established by this subdivision are not severable.If any provision of this subdivision or its application is held invalid, theentire subdivision is repealed.

(41)      Objects of art heldby the North Carolina State Art Society, Incorporated.

(42)      A vehicle that is offeredat retail for short‑term lease or rental and is owned or leased by anentity engaged in the business of leasing or renting vehicles to the generalpublic for short‑term lease or rental. For the purposes of thissubdivision, the term "short‑term lease or rental" shall havethe same meaning as in G.S. 105‑187.1, and the term "vehicle"shall have the same meaning as in G.S. 153A‑156(e) and G.S. 160A‑215.1(e).A gross receipts tax as set forth by G.S. 153A‑156 and G.S. 160A‑215.1is substituted for and replaces the ad valorem tax previously levied on thesevehicles.

(42a)    (Effective fortaxes imposed for taxable years beginning on or after July 1, 2009) Heavyequipment on which a gross receipts tax may be imposed under G.S. 153A‑156.1and G.S. 160A‑215.2.

(43)      Real or tangiblepersonal property that is subject to a capital lease pursuant to G.S. 115C‑531.

(44)      (Effective fortaxable years beginning on or after July 1, 2008) Free samples of drugsthat are required by federal law to be dispensed only on prescription and aregiven to physicians and other medical practitioners to dispense free of chargein the course of their practice.

(45)      (Effective fortaxable years beginning on or after July 1, 2008) Eighty percent (80%) ofthe appraised value of a solar energy electric system. For purposes of thissubdivision, the term "solar energy electric system" means allequipment used directly and exclusively for the conversion of solar energy toelectricity.  (1939,c. 310, s. 303; 1961, c. 1169, s. 8; 1967, c. 1185; 1971, c. 806, s. 1; c.1121, s. 3; 1973, cc. 290, 451; c. 476, s. 128; c. 484; c. 695, s. 1; c. 790,s. 1; cc. 904, 962, 1028, 1034, 1077; c. 1262, s. 23; c. 1264, s. 1; 1975, cc.566, 755; c. 764, s. 6; 1977, c. 771, s. 4; c. 782, s. 2; c. 1001, ss. 1, 2;1977, 2nd Sess., c. 1200, s. 4; 1979, c. 200, s. 1; 1979, 2nd Sess., c. 1092;1981, c. 86, s. 1; 1981 (Reg. Sess., 1982), c. 1244, ss. 1, 2; 1983, c. 643,ss. 1, 2; c. 693; 1983 (Reg. Sess., 1984), c. 1060; 1985, c. 510, s. 1; c. 656,s. 37; 1985 (Reg. Sess., 1986), c. 982, s. 18; 1987, c. 356; c. 622, s. 2; c.747, s. 8; c. 777, s. 6; c. 813, ss. 5, 6, 22; c. 850, s. 17; 1987 (Reg. Sess.,1988), c. 1041, s. 1.1; 1989, c. 148, s. 4; c. 168, s. 6; c. 705; c. 723, s. 1;c. 727, ss. 28, 29; 1991, c. 717, s. 1; 1991 (Reg. Sess., 1992), c. 975, s. 2;1993, c. 459, s. 2; 1993 (Reg. Sess., 1994), c. 745, s. 39; 1995, c. 41, s. 2;c. 509, s. 51; 1995 (Reg. Sess., 1996), c. 646, s. 12; 1997‑23, ss. 1, 3, 9; 1997‑443, s.11A.119(a); 1997‑456, s. 27; 1998‑55, ss. 10, 18; 1998‑212,s. 29A.18(a); 1999‑337, s. 35(a); 2000‑2, s. 1; 2000‑18, s.1, 2000‑140, ss. 71, 72(a); 2001‑84, s. 3; 2001‑427, s.15(a); 2001‑474, s. 8; 2002‑104, s. 1; 2003‑284, s. 43A.1;2007‑477, s. 1; 2007‑527, s. 37; 2008‑35, s. 2.1; 2008‑107,s. 28.11(a); 2008‑134, s. 72; 2008‑144, s. 1; 2008‑146, ss.4.1, 5.1; 2008‑171, ss. 7(a), (b); 2009‑445, s. 21.)